Genoa Equipment Company Has Three Separate Divisions: Tractors,Trailers,and Trucks The Company Has Recently Implemented a New Performance Evaluation System

question 16

Multiple Choice

Genoa Equipment Company has three separate divisions: Tractors,Trailers,and Trucks.Information about the three divisions follows:
$\begin{array}{llll}&\text { Tractors }&\text { Trailers }&\text { Trucks }\\\text { Operating income } & \$ 10,125,000 & \$ 19,500,000 & \$ 3,600,000 \\\text { Operating assets } & \$ 15,000,000 & \$ 78,000,000 & \$ 13,500,000\end{array}$
The company has recently implemented a new performance evaluation system.Based on this new system,a division manager would only receive a bonus if the ROI of the division was greater than 45% and residual income was in excess of $6,000,000.If management uses a cost of capital rate of 22%,which division manager(s) would be eligible for a bonus?

• A)The Trucks Division.
• B)The Trailers Division.
• C)The Tractors Division.
• D)All of the divisions.
• E)None of the answer choices is correct.

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Definitions:

Managerial Control Systems

Tools and processes used by managers to regulate organizational activities and ensure the achievement of goals.

Feedforward Controls

A managerial control strategy focusing on regulating inputs (rather than outputs) to ensure that they meet required standards before the work process begins.

Feedback Control

A management technique in which performance is measured and compared against desired outcomes, and adjustments are made as necessary to achieve objectives.

Budget Overruns

Situations where the actual spending on a project or operation exceeds its initially planned or allocated budget.